Just because you have a CDS swap supposedly covering your investment doesn't mean that your counter-party will be able to pay if it is triggered. After all, the whole point of CDS swaps was to enable you to treat risky junk as though they were AAA investments and relieve you of the obnoxious reserve requirements. No one ever thought they would have to pay up and many probably won't. So everyone is afraid to find out.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

The example I had in mind was Goldman and AIG. AIG had lost effective internal controls when the former CEO departed and insured below reasonable cost. I do not know if buying a CDO makes sense to free up capital if the CDO is properly priced. I will bet that lots of CDO issuers on Greek debt would be happy to give back premium they have received and then some to be off the hook on those CDOs. And even good rocket scientists make rockets that explode.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."